4 Huge Challenges Holding Yahoo! Back
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Previously, we discussed Yahoo!’s (NASDAQ: YHOO) performance in the mobile search market in comparison to Google (NASDAQ: GOOG) and Microsoft’s (NASDAQ: MSFT) Bing. To justify a relatively bleak assessment, it is important to take into account Yahoo!’s leadership and the possibility of new directions with another leader at the helm.
What Happened
Last week it was revealed that Yahoo!’s Chief Executive Officer Scott Thompson apparently lied on his resume. On published Yahoo! documents, including the company’s latest annual report (a legal document that are sworn to be truthful) it is said Thompson holds a bachelor’s degree in both accounting and computer science from Stonehill College. In truth, his degree is only in accounting.
Yahoo! labeled the mistake an “inadvertent error.” The company has hired outside counsel to conduct an investigation of the false statement. The error has already led to the retirement of one member of the CEO search committee and it is likely the heads on the chopping block won’t stop there.
What it Means
So what is the true fuss over an additional word and/or a few classes short of a degree? It speaks directly to Yahoo!’s direction and operational efficiency. Hiring a top executive like Thompson should at the very least involve extensive background checks conducted by a specialized search firm. This factoid being missed could mean that they didn’t conduct the due diligence which, if true, would be a poor reflection on the company.
Major shareholders are already demanding that the company fire Thompson. The investor group Third Point sent a stern letter this week to Yahoo!'s board demanding that it remove Thompson by the end of the week. Yahoo!'s response has merely been to form a "special committee" to review Thompson's academic credentials.
This slow movement is yet another example of Yahoo!’s self-destruct sequence activating. If it waits too long, possible replacements for the position will be extremely limited.
Who Could Lead
It is entirely possible Yahoo! will look internally to fill the position. It’s current Executive Vice President, Ross Levinsohn, has tremendous experience within the company. However, even with a positive review from his time under Rupert Murdoch as head of Fox Interactive, there is very little to point to in terms of his leading his present company with any substantial strategy for growth or improvement.
Likewise, Tim Morse, the current Chief Financial Officer, is a possible choice. Morse served as interim CEO for several months after Carol Bartz was fired in September of last year. Before joining Yahoo in 2009, he spent two years at chipmaker Altera and 15 years at General Electric. The group calling for Thompson’s removal actually mentioned Morse by name for Yahoo! to appoint immediately, even as a temporary measure.
A suggestion I concur with is for Yahoo! to look outside its own walls and toward those in the industry who are growing, such as Google. Google's Nikesh Arora was on Yahoo!'s short list the last time it was looking for someone to lead the charge. Arora has been referred to as Google's top salesman and neglecting the possibility to gain from his vision would be a serious misstep for the company.
What it Needs
Whoever is tasked with attempting to right the ship, Yahoo! faces some serious problems and obstacles. In the face os such tremendous competition such as Google and Microsoft, Yahoo! must begin making itself known, proclaiming what Yahoo! really stands for, either through service or product.
In terms of search engines, Yahoo! has seemingly ceased to even be a player. December of 2011, Bing officially overtook Yahoo! with its share of searches at 15.1% compared to Yahoo!'s, which fell to 14.5%. Not only that, Microsoft has the vision to see where things are going and connect to them as well as form strategic partnerships to ensure its products success. Bing's search results can display one's Facebook friends when a Facebook account is linked with Bing via Facebook Connect. Users then have the option to send messages to their friends in the search results. Capitalizing on the growth of social networks, Microsoft has increased its competitiveness while Yahoo! has not put forth any effort into being more convenient or comparable.
Yahoo! also needs to address the issues it faces in house. Several of these were presented when Thompson stepped in, however, in such a short time, little has been done. The challenges that remain are:
1) Relevance: Yahoo! was once a name that equated with messaging, social connection, fun, and practicality. It now seems to stumble along further itself from this former perception.
2) Technology Innovation: Under Bartz, Yahoo! began structuring a companywide cloud and big data set-up systems to improve operations. Thompson failed to continue this trend, instead focusing on a suite of business products that still has yet to hit beta testing.
3) Definition: If Yahoo! is indeed a media company, why has it not sought to emphasize it? Who has it always played catch up to ever expanding companies such as Google which purchased Youtube, Blogger, etc? The next leader needs to define Yahoo in a way where it can be cutting edge.
4) Morale: With such a tumultuous year, Yahoo! needs a solid leader – one that preferably has a verifiable resume. Yahoo! employees have been through a lot and will need direction and motivation to drive the company up out of its rut.
Summary
It is hard to say who the board will choose to lead. However, it will be exceedingly difficult for the new CEO to stop the company’s downward trajectory. It still has the potential to succeed, but lacks the vision and strategy that its competitors have. I see Google and Microsoft both continuing their drive upward based on superior strategy and steady leadership.
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